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Enterprise content management software provider Geong International Ltd is paying up to HK$120m (£9.6m) for online marketing services provider Adbeyond and is considering a flotation on the Hong Kong Stock Exchange.
Geong intends to raise HK$8m (£5m) from the issue of two-year 7.5% convertible secured loan stock to a major Chinese customer. Adbeyond is the security and the issue of the loan stock is dependent on the acquisition going ahead.
Hong Kong-based Adbeyond trades as Guru Online and is involved in providing advertising networks and social media marketing. Geong believes that it can sell these services to its existing customers. It also widens the groupís geographic base.
Adbeyond increased its turnover from £1.71m to £3.1m in the year to March 2011 and it has already won £1.7m of new contracts for this year. Pre-tax profit almost doubled from £308,000 to £605,000 in 2010-11.
The consideration for Adbeyond is payable in two equal tranches and the total will be half in cash and half in shares. The second tranche is dependent on post-tax profit performance in the year to March 2012.
Even after the acquisition, Geong remains relatively small for a Hong Kong listing. Other companies, such as Asian Citrus and West China Cement, have been much larger when they gained a Hong Kong listing. Geong is modestly rated and wants to improve its rating.
At 37.5p a share, down 3.5p, Geong is valued at £14.2m.
Geong has already said that it will report a higher than expected profit for the year to March 2012 on revenues of £11m. Net cash was £5.4m at the end of March 2012 and has raised £2.4m from a convertible since then.
Download the June 2011 edition of AIM Journal at http://www.hubinvest.com/AIMPDFJuly2011_22.pdf
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